Wednesday, January 13, 2010

'If you've got a trade, you've got it made'

Los Angeles Times article "'If you've got a trade, you've got it made'" (January 13th, 2010) appears to make the assumption that the elasticity of demand for blue-collar work is inelastic--that blue-collar wages are relatively untouched by new entrants into the market.

Our nation needs blue- collar workers -- skilled mechanics, machinists, welders, carpenters and electricians, as well as computer, solar and cable technicians, etc. -- just as much as it needs college grads.

As one retired plumber told me: 'No one is going to outsource your local repair guy. If you've got a trade, you've got it made.'

This ignores the fact that even if demand is completely inelastic for local repair guys, as the retired plumber suggests, supply can increase and reduce the wages of blue collar workers, rendering them more vulnerable than the times admits. The process by which wages fall is displayed graphically below (click to enlarge).  Indeed, one expects that this is the reason for what has happend to U.S. born blue collar workers (using partial identification, we conjecture that we can say that demand increased more than supply increased, as wage differentials have fallen and quantity of workers has increased).  Larry Katz and Claudia Goldin's diagram for the high school/college wage gap from their Brookings Papers on Economic Activity (2007) is also displayed graphically below (click to enlarge).

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